Thanks to the current state of the economy, new debt settlement companies are cropping up daily. They all offer the same promise; to reduce your debt by 50% or even up to 75% of the total amount you owe.
Of course this service does not come for free. The prospect of paying only 50 cents on the dollar on your outstanding balances, not to mention the promise of no longer receiving those pesky warning letters is sometimes so attractive that any fee seems minimal. Before you rush into a decision that could have a lasting impact on your personal finances, you should learn as much as possible about this process.
Many people think debt settlement is a new process but that is not the case. While it is true that more consumers are considering this option as a result of the recession and tough economy, settling debt for less than you owe has been an option for years. Here are a few issues that have been reported in the news which raise concerns over using debt settlement as an option for debt relief.
Debt settlement scams- When there are desperate people, there are con artists who try to take advantage of the situation. Debt settlement is a legal and legitimate option, however many people are falling victim to debt settlement scams or sign up with a company that is not on the up-and-up. Make sure the company is a member of The Association of Settlement Companies (TASC) and has a solid rating with the Better Business Bureau (BBB). More details please visit:-ninjanetworth.com simonparkesblog.com blogfeedletters.com marlonwayansnetworth.com decora-fashion.com rommedicalabbreviation.com babypetnames.com
Full disclosure- Many consumers who have trusted the wrong person or company have complained they were not fully informed of possible consequences before signing enrollment contracts. Do your homework and understand the process before you sign on the dotted line.
Higher debt- Certain news reports indicate that instead of reducing your debt, the process actually increases the amount of money you owe to creditors. While this is an extremely rare scenario, understand that late fees and interest accrue on the balance until it is settled.
These are just a few of the stories that have been reported. Consumers should understand that debt settlement is not the best choice for every situation. Unlike other debt elimination strategies such as credit counseling or debt consolidation- debt settlement should be considered a last resort before bankruptcy. If you owe a lot and are behind on your monthly payments, it is likely that you could benefit from settling your debts.
Creditors have been known to settle debt that is outstanding for less than the amount owed. People who face a severe financial hardship and fall behind on payments may be able to negotiate a lower payoff amount that is often hundreds if not thousands of dollars less than the current balance. When this works out, the creditor will usually require one single payment or perhaps a few payments to settle the debt. This means the person must have some means of either saving toward settlement or access to funds to meet their end of the agreement.